REER climbs; exports lose steam

Rupee posts slight inter-bank gain; gold prices fall despite global rally

KARACHI:

Pakistan's Real Effective Exchange Rate (REER) index appreciated to 101.7 in September 2025, up from 100.1 in August, according to the latest data released by the State Bank of Pakistan (SBP). The month-on-month increase of 1.64% indicates that the rupee slightly strengthened in real terms against the basket of trading partner currencies.

The REER index, which measures the value of the rupee relative to the price levels in major trading partners, serves as a key indicator of external competitiveness. A REER value above 100 suggests that the currency may be relatively overvalued, potentially making exports less competitive, while a value below 100 implies undervaluation, which can support export growth.

Meanwhile, the Nominal Effective Exchange Rate (NEER) index declined marginally to 37.77 in September from 37.84 in August, showing a 0.21% month-on-month dip. The NEER represents movements in the rupee's nominal value without adjusting for inflation differentials.

The dataset, available since July 2001 and updated monthly, highlights that the SBP recalculates both indices using revised trading partner weights based on each country's share in Pakistan's external trade. The REER and NEER indices are key tools for monitoring the rupee's external value and assessing shifts in competitiveness.

Analysts note that the latest appreciation in REER reflects relative price movements between Pakistan and its trading partners rather than a direct shift in exchange rate policy.

On Monday, the Pakistani rupee registered a slight gain against the US dollar, appreciating by 0.01% in the inter-bank market. According to data released by the State Bank of Pakistan (SBP), the local currency closed at Rs281.07 per dollar, rising by Rs0.03 from the previous session.

During the preceding week, the rupee had also shown minor improvement, strengthening by Rs0.07, or 0.02%, to settle at Rs281.10 against the US dollar, compared to Rs281.17 recorded a week earlier.

Meanwhile, gold prices in Pakistan declined on Monday, even as international bullion markets surged over 2% amid expectations of further US interest rate cuts and persistent safe-haven demand. The contrasting trends reflect the interplay between local currency movements, investor sentiment, and volatile international price dynamics.

According to data released by the All-Pakistan Gems and Jewellers Sarafa Association, the price of gold per tola dropped by Rs1,400 to settle at Rs444,900, while the rate for 10 grams of gold fell by Rs1,200 to Rs381,430.

In the previous session on Saturday, the per-tola rate had dipped by a steep Rs10,600 to Rs446,300, signaling a short-term cooling in domestic demand and minor correction in local pricing despite global strength.

Commenting on recent trends, Adnan Agar, Director at Interactive Commodities, said, "Gold made its all-time high on Friday at approximately $4,380 before slipping sharply to a low of $4,185 – a correction of almost $200. Earlier the same day, it had risen by a similar margin, reflecting extreme price volatility. The market rebounded again today (Monday), opening around $4,227-4,237 and later standing at $4,348, marking a fresh $110 increase."

Agar explained that recent fluctuations suggest that gold remains in a long-term uptrend but is struggling to undergo a meaningful correction.

The correction was long overdue. It happened briefly, but the market bounced back the very next day. At least technically, gold should fall back towards $4,000, and if it breaks that level, it could test $3,700-3,800, he said.